Aviva Plc · LSE:AV.

Aviva — Investor Day (November 2003)

30 slides from Aviva's investor day presentation, Nov 10, 2003

  1. Slide 1: Aviva Spain: Bancassurance partner for life

    Aviva Spain Bancassurance partner for life Gerardo Arostegui 10 November 2003 © Aviva plc

  2. Slide 2: Disclaimer

    Disclaimer This presentation may contain certain “forward-looking statements” with respect to certain of Aviva’s plans and its current goals and expectations relating to its future financial condition, performance and results. By their nature, all forward-looking statements involve risk and uncertai

  3. Slide 3: Agenda: Market potential

    • Market potential • Aviva’s market position and model • Products • Shareholder Value © Aviva plc 2

  4. Slide 4: Strong medium-term growth drivers

    Strong medium-term growth drivers Dependency ratios are …Spanish PPS (i) one of …underdeveloped private increasing... the most generous… savings market 70 100 100 (Replacement ratio %) 60 (Investments/GDP %) (Dependency ratio %) 50 75 80 40 60 30 50 20 40 25 10 20 0 0 0 95 00 10 20 30 50 y ly ce K n

  5. Slide 5: Agenda: Aviva's market position and model

    • Market potential • Aviva’s market position and model • Products • Shareholder Value © Aviva plc 4

  6. Slide 6: Aviva is the market leader in H1 2003

    Aviva is the market leader in H1 2003 ……...from top 30 in 2000 Life insurance ranking 1H 2003 Premiums Growth Market Share (€m) (%) (%) Aviva 1,071 70 12 Mapfre + C Madrid 846 -14 9.4 La Caixa 762 -1 8.5 BBVA 615 -10 6.9 Generali 609 59 6.8 C Catalunya 411 38 4.6 Ibercaja 380 41 4.2 B Sabadell 358 -

  7. Slide 7: Spanish bancassurance partnerships at a glance

    Spanish bancassurance partnerships at a glance Business Aviva’s EV Number of (1) commenced consideration acquired customers Region Bancaja Aug 2000 £217m £47m 2.4 m Valencia Unicaja Oct 2001 £95m £14m 2.0 m Andalusia Caixa Galicia Oct 2001 £93m £6m 2.3 m Galicia Caja España Jan 2002 £88m £12m 1.3 m

  8. Slide 8: Bancassurance network leading market shares in territories accounting for c.70% of GDP

    Aviva’s bancassurance network has leading market shares in territories that account for c.70% of Spanish GDP Caixa Galicia Caja España - Strong multi-regional 2% 5% 6% presence in fastest 2% 1% growing regions in Spain 19% 6% 3% - Growing presence in attractive areas outside home regions (Madrid, 17

  9. Slide 9: An under penetrated bank client base

    An under penetrated bank client base Life insurance & pension reserves as % of total customer funds 2002 La Caixa 18.0% Mapfre - Caja Madrid 16.0% Bancaja 14.9% Banco Sabadell 13.5% Ibercaja 13.3% CAM 12.6% Caixa Catalunya 12.0% BBVA ex-America 10.0% Banco Popular 7.1% SCH ex-America 6.9% Banco Atlá

  10. Slide 10: One factory business model

    One factory business model Aviva Spain Key features (1) (1) • Management control 100% 50% TPA 50% Unicorp Vida • Exclusive and perpetual Aviva Vida Aseval Bia Galicia distribution agreements 50% C. España Vida • One “factory”, 87 people Ag. C. Granada(2) • Economic alignment through 50% 50/50 JV Uni

  11. Slide 11: A proven and successful bancassurance process

    A proven and successful bancassurance process Analyse Bank client database Selection of target customer (CRM) No health Issue policy in issue branch Storage in database accessible in branches Customer Client Physical Explanatory Product acceptance comes into presence Prompt phase simulation / data b

  12. Slide 12: An attractive proposal for our partners

    An attractive proposal for our partners… What Aviva offers Benefits for our partners • Broad-based partnership • Broader financial services • Worldwide bancassurance experience • No learning curve, full range of competitive and local product expertise products today • Developed platform, Aseval • Ac

  13. Slide 13: Agenda: Products

    • Market potential • Aviva’s market position and model • Products • Shareholder Value © Aviva plc 12

  14. Slide 14: Overview of Aviva product mix / characteristics

    Overview of Aviva product mix / characteristics • 41% of our risk premiums bundled with bank loans. Risk • Client less sensitive to policy pricing, leading to high margins. • Pension plans focus on fixed income ( 79% of our AUM). Pensions • Attractive tax treatment which increases with duration. Thi

  15. Slide 15: Flexing the product mix

    Flexing the product mix New business sales (APE) in Aviva Spain 2002 Full Year Discrete Q3 2003 Pension Life & Savings 27% 66% Life Risk Life Risk 9% 19% Pension 15% Life & Savings 64% 14 Source: Aviva © Aviva plc

  16. Slide 16: Agenda: Shareholder Value

    • Market potential • Aviva’s market position and model • Products • Shareholder Value © Aviva plc 15

  17. Slide 17: Transforming Aviva's position in the Spanish market

    Transforming Aviva’s position in the Spanish market New business sales (APE) 200 180 160 First 140 bancassurance 120 deal £m APE 100 80 60 40 20 0 1997 1998 1999 2000 2001 2002 9m 2003 © Aviva plc 16

  18. Slide 18: Strong growth in profitability

    Strong growth in profitability Bancassurance: new business Bancassurance: Life achieved contribution pre-tax and cost of capital pre-tax operating profit 90 100 80 90 80 70 70 60 (£m) 60 (£m) 50 50 40 40 30 30 20 20 10 10 0 0 2000 2001 2002 9m 2003 2000 2001 2002 6m 2003 © Aviva plc 17

  19. Slide 19: Strong margins supported by pricing, low expenses and scale advantages

    Strong margins supported by pricing, low expenses and scale advantages Bancassurance Quarterly Margins 100.0% 80.0% 60.0% Average margin 54% 40.0% 29% 20.0% Post COC & tax 0.0% Q4 Q2 Q4 Q2 Q4 Q2 2000 2001 2001 2002 2002 2003 © Aviva plc 18 Source: Annual reports

  20. Slide 20: Spanish protection products more profitable than UK products

    Spanish protection products are inherently more profitable than UK products... UK protection product cashflow • Pricing: less competitive pressure • Loyal client base • Low expenses in Spanish bancassurance 1 2 3 4 5 6 7 8 9 10 years Spanish protection product cashflow ...which leads to lower strain

  21. Slide 21: Low costs underpin attractive margins

    Low costs underpin attractive margins • One factory efficiency benefits whole network Acquisition and administration costs (% of premium, H1 2003) 6 5.65% 5 4 (%) 3 1.95% 2 1.35% 1 0 Aseval (Aviva) Other large Total Spanish life bancassurers market Source: ICEA © Aviva plc 20

  22. Slide 22: Profitable cash-flow from early stages of growth business

    Profitable “cash-flow” from early stages of growth business Bancassurance pre-tax MSSB evolution 35 30 29 FY 25 23 £m HY 20 16 15 FY HY 10 7 HY 5 FY 0 00 01 02 6m 03 © Aviva plc 21 Source: Annual reports

  23. Slide 23: Growing Embedded Value

    Growing Embedded Value • £505m (£448m goodwill(i)) invested in Spanish bancassurance • Aviva’s 50% share: NBC Post COC, Post Tax £26.5m for 9m 2003 • Current implied multiple of 12x NBC to goodwill Bancassurance EV evolution (Aviva 50% share) 200 161 150 134 EV value 106 generation ( £m ) 100 57 50

  24. Slide 24: Shareholder returns linked to value creation

    Shareholder returns linked to value creation vs 10 year business plans Example bancassurance business case Key features 17,5% • Incentivisation 15,0% − earn-outs 12,5% • Protection − capped future 10,0% payments IRR − earn-ins 7,5% − conservative 5,0% projections − exit penalties at 2,5% Minimum Ear

  25. Slide 25: Aviva Spain summary

    Aviva Spain summary • Spain’s leading life business in 3 years - Strong growth prospects - Attractive product pricing - Expense advantage - Strong margins • Shareholder value visible at early stages of business development © Aviva plc 24

  26. Slide 26: Appendix

    Appendix © Aviva plc 25

  27. Slide 27: Main features of Aviva's bancassurance products

    Main features of Aviva’s bancassurance products Product Description Risk (linked) Coverage Main features • Linked to • Death • Financial entity beneficiary for outstanding personal debt on personal loans/mortgages. Excess loans/mortgages • “Seguro of sum assured over outstanding debt paid Financiaci

  28. Slide 28: Main features of Aviva's bancassurance products (continued)

    Main features of Aviva’s bancassurance products (continued) Product Description Savings Coverage Main features • Survivorship: Payment of • Minimum guaranteed variable yield accumulated savings at settlement of plan • Quarterly yield higher than minimum established by DGS • Death: technical reserve

  29. Slide 29: Main features of Aviva's bancassurance products (continued)

    Main features of Aviva’s bancassurance products (continued) Product Description Unit-linked Coverage Main features • Survivorship: payment of • Investment risk is borne by policyholder market value of • Flexible asset mixed based on policyholder participation at settlement risk/return preference or

  30. Slide 30: Main features of Aviva's bancassurance products (continued)

    Main features of Aviva’s bancassurance products (continued) Product Description • Pensions • Retirement • Investment risk is borne by pension-holder • Death • Exceptionally cash granted in event of • Disability unemployment or critical disease • In the three events lump • Favourable tax treatment si

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